Severed Mineral Estates and Surface Use Disputes Part One: Extent of Implied Easement

Due perhaps to geologic serendipity, Texas has a long and extensive history of oil and gas exploration and production. Consequently, much of Texas’ lands have experienced severance of mineral from surface estate and resulting complications of concurrent occupancy by parties whose interests are not always fully aligned. In Texas, the owner of a severed mineral interest (and its mineral lessee) generally enjoy an implied right to enter upon the surface and to use the surface estate for the purpose of exploring, drilling, producing, transporting, and marketing the minerals. The Texas Supreme Court has described this implied right as “a well established doctrine from the earliest days of the common law.” The underlying rational is that a grant, lease, or reservation of minerals would be worthless if the grantee, reserver, or lessee did not have access to and use of the surface estate.

In some cases, the extent of surface rights are defined in the deed effecting the mineral severance or in the oil and gas lease. For example, parties sometimes agree to “no surface occupancy” provisions, essentially requiring the use of directional drilling from off-site locations. Agreements of this kind are increasingly common in densely settled and urban areas. Other, more common examples include surface damage and restoration requirements, road location and maintenance provisions, and limitations on use of surface or subsurface water or handling of wastewater and materials. Of course, if the documents address these types of concerns, they are generally enforceable if clearly drafted.

However, many (particularly older legacy leases) make little or no provision for mineral surface occupancy—at least few that benefit the surface owner. Where the surface use rights are not expressly defined, Texas courts have evolved analyses to evaluate and resolve disputes that arise between surface owners and mineral owners regarding their respective rights. Courts have generally held that the mineral estate’s surface rights are dominant, and the surface owner may not unreasonably interfere with the reasonable use of the surface for the operation and development of the mineral estate. The word “dominant” in this context means “benefited,” not necessarily “superior.” Similarly, “[t]he surface estate is not servient because it is lesser or inferior but because it must allow the exercise of that implied right” by the dominant estate holder. The mineral estate’s implied right to use the surface has been interpreted rather broadly in Texas, and sometimes extends beyond mere right of access. For example, a survey of case law reveals that Texas courts have determined that mineral owners or lessees had the right to:

determine the location of legally spaced wells;

ingress and egress across the surface to wells;

construct roads to wells;

use materials obtained from the surface in construction of roads;

drill and operate water wells, for us in primary recovery operations;

drill and operate water wells on the surface to develop the mineral right, without compensation;

dispose of salt water in an injection well where no alternative means existed on premises;

dispose of drill cuttings in open slush pits;

construct and operate pipelines to transport gas from unit including the surface owner’s land;

conduct geophysical explorations by seismographic tests; and

construct temporary housing.

Of course, these cases are arguably limited to their unique facts, but they are instructive for purposes of this discussion. Given the breadth of this list, there are obviously many opportunities for conflicts with the rights of surface owners. While a mineral owner is obligated to act reasonably, so long as the mineral operations are conducted in a non-negligent “usual and customary manner,” the fact that they inconvenience or are objectionable to the surface owner or even diminish the value of the surface estate does not alone create liability.

The dominant estate doctrine, however, does have some limitations. A mineral owner or mineral lessee does not have unlimited right to enter on and use the surface estate. Instead, as discussed below, the mineral owner’s use of the surface must be reasonably necessary to enjoyment of the mineral estate and its rights must be exercised reasonably. An in any event, surface and mineral owners have the right to define the nature of their respective rights in the surface; and clearly expressed obligations and agreements regarding use and occupancy of the surface estate will “trump” those implied in law.

In Texas, Generally No Obligation to Restore Surface

In Texas, mineral owners generally are not obligated to pay “surface damages” prior to commencement of mineral operations absent specific agreement. Likewise, mineral owners and lessees generally do not have an implied duty in Texas to restore the surface following abandonment of operations, absent a finding that the mineral lessee carried out the operations in a negligent manner or used more of the surface than reasonably necessary. As such, it is not uncommon for parties to include provisions in the oil and gas lease requiring the lessee to pay surface damages or obligating to the lessee to perform certain surface restoration measures, regardless whether the use was reasonable.

The potential for conflict arising from not addressing surface restoration in the severance document can be seen in the Texas case of Warren Petroleum Corp. v. Monzingo, which the oil and gas leases did not expressly provide for surface restoration. The surface landowner sought to recover damages from the lessee, alleging that the lessee failed to restore the surface, leaving behind unfilled slush pits, ruts from heavy equipment, and a gravel road to the drilling site. The Texas Supreme Court held that mineral lessees have no implied duty to restore the surface, and are not liable for the costs to restore the surface absent a finding that the mineral lessee carried out the operations in a negligent manner or used more of the surface than was reasonably necessary.

This is not to say that a Texas mineral lessee is never liable for surface damages or restoration. The mineral lessee can only use so much of the surface as is reasonably necessary for the intended (and authorized) mineral operation and the use must be non-negligent. Obviously, any claim of this kind is going to be based upon the specific facts surrounding the operations and damages involved – meaning that in many cases there is likely going to be an issue of fact that will be determined by a jury.

Trespass – Use of More Than “Reasonably Necessary”

According to the Texas Supreme Court, a mineral lessee has “the right to use as much of the premises, and in such a manner, as [is] reasonably necessary to comply with the terms of the lease and to effectuate its purposes.” A lessee is liable to the surface owner under a theory of “trespass” if the lessee exceeds an express limitation in a lease, uses more of the land than is reasonably necessary, or uses the surface in a manner that is not reasonably necessary. To recover, the burden is generally on the surface owner to prove that the lessee’s use was more than reasonably necessary.

Negligence

A mineral owner or lessee is required to act non-negligently and can be liable for surface damages that are caused by negligence. In exercising its right to use the surface, a lessee owes a duty to the surface owner not to negligently injure the surface estate. To recover damages for negligent use of the surface, the surface owner has the burden to prove “specific acts of negligence.”

A number of cases have arisen involving loss of cattle resulting from the cattle entering the well site or drinking contaminated water around the oil well. A lessee is generally under no duty to exclude cattle from the vicinity of the well, such as by constructing fences, and therefore a lessee only owes a duty to refrain from intentionally or wantonly injuring the lessor’s livestock.

Balancing the Interests – “Due Regard” and Accommodation Doctrine

Although the mineral estate is the dominant estate and the surface estate is the servient estate, this does not mean that the mineral estate is afforded an absolute and unrestricted right to use the surface. To the contrary, Texas courts have determined that the interests of the mineral owner and the surface owner must be balanced. Over several decades, Texas courts have developed the “due regard” rule and the “accommodation doctrine,” which seek to provide a framework for striking that balance.

In the next edition of Producer’s Edge, we will survey recent case law on the accommodation doctrine, and synthesize those cases into a refined framework for analysis.